A Foot Locker store in Broomfield, Colo., on Nov. 17, 2016.Rick Wilking/Reuters
Shares of Foot Locker FL-N cratered about 35 per cent on Wednesday, and dragged down those of its rivals, after the retailer lowered its annual forecasts as it reels from weaker consumer demand in the face of still-high inflation.
The athletic-wear retailer, which also missed quarterly sales expectations, said it would pause its quarterly dividend payouts beyond October, and flagged softer demand in July – typically when back-to-school shopping starts.
The lowered 2023 forecast would help “compete for price-sensitive consumers,” according to Foot Locker CEO Mary Dillon.
The company had in May said it would bank on higher discounts to appeal to inflation-pinched back-to-school shoppers.
A Deloitte report showed that spending on apparel was likely to fall 14 per cent as back-to-school shoppers prioritized essentials.
“The athletic segment has broadly slowed in the U.S … Foot Locker on top of that has company-specific issues with the repositioning of its banners, mainly Champs, which is further dragging results,” said Cristina Fernandez, analyst at Telsey Advisory Group.
The weak forecast from Foot Locker dragged shares of peers Nike NKE-N, Dick’s Sporting Goods DKS-N and Under Armour UAA-N down between 2 per cent and 4 per cent. Shares of European peers Adidas and Puma skid 4 per cent to 6 per cent.
Dick’s Sporting Goods on Tuesday also cut its full-year profit targets, slammed by hits to its margins from retail theft.
Foot Locker’s second quarter also took a hit from inventory shrink, or retail theft, and steeper discounts. Its gross margins slumped 460 basis points.
The company expects sales to fall 8.0 per cent to 9.0 per cent this year, compared with its previous forecast of a drop of 6.5 per cent to 8.0 per cent.
It trimmed annual earnings per share forecast to $1.30-$1.50 from $2.00-$2.25.